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中国暂停三家银行的外汇交易业务;印度最终批准 Hannover Re 在该国设立分支机构

Flying Into The Danger Zone; Norwegian Air Shuttle

Banking

Street Talk Episode 39 - A New Era For Blockbuster Bank M&A

Advertising Market Growth Unable To Keep Up With Strong GDP

Street Talk Episode 38 - PG&E Bankruptcy Reveals Climate Change Risk Facing Calif. Utilities


中国暂停三家银行的外汇交易业务;印度最终批准 Hannover Re 在该国设立分支机构

* 据《南华早报》引述中国国家外汇管理局的消息报道,2016年该监管机构在上海暂停了3家银行办理售汇业务,因为这3家银行进行合计高达27亿美元的非法外汇交易。此前曾发现这3家银行通过伪造交易参与非法跨境转移资金。

* 据《印度报业托拉斯》引述一项公司声明报道,印度保险监管与发展局授予全球性再保险公司 Hannover Re 在该国设立分支机构的注册证书。总部位于美国的 Reinsurance Group of America Inc.、德国的 Munich Re、瑞士的 Swiss Re Ltd. 和法国的 SCOR SE 同样获得了该监管机构的最终批准。

* 据《Maeil Business Newspaper》报道,Shinhan Card Co. Ltd. 的印尼单元 PT Shinhan Indo Finance 在该国开展信用卡业务的计划获印尼央行批准,并自2017年2月起生效。

* 据《Indo-Asian News Service》报道,印度 ICICI Bank Ltd. 将与社交网络服务提供商 Twitter Inc. 合作推出该行的客户服务支持功能。ICICI Bank 是印度第一家在其 Twitter 帐户中加入新客户服务功能的银行。

大中华地

* 据《中国网》报道,中国银监会高级官员于学军表示,中国银行业17.5%的存款准备金率太高,有充足的降准空间,应适时作出调整。于学军表示,中期贷款便利等货币工具最好是在降准之后使用。

* 据《路透社》报道,上海银监局要求银行不得变相提高小微企业续贷准入门槛,并要求银行放宽小微贷款不良容忍度要求。

* 据《台北时报》报道,元大宝华研究院表示,由于结构性约束限制增长,2017年台湾经济可能继续缓慢增长,GDP增速预计为1.8%。该智库将2016年的增长预测从之前预测的1.1%调高至1.37%,原因是外部需求得到改善。

* 据《路透社》引述相关银行股东的消息报道,由小米支持的互联网银行近期更换新的英文名称之后预计将很快开业。

日本与

* Mizuho Financial Group Inc. 首席执行官 Yasuhiro Sato 向《日刊工业新闻》透露,该公司将推动实施一项基本成本改革。

* 据东京《日本经济新闻》报道,Daiwa Securities Group Inc. 的首席执行官 Takashi Hibino 表示,2017年该公司计划连续第五年在全集团范围内实施加薪。

* 据《朝鲜日报》报道,KB Insurance Co. Ltd. 将通过向 KB Financial Group Inc. 配股的方式募集1706亿韩元。该公司为了将风险基础资本比率提高约10%,总共将发行650万股新股。

* 据《朝鲜日报》报道,Industrial Bank of Korea 的首席执行官 Kim Do-jin 表示,该行计划海外利润占比超过20% 。Kim 于12月28日开始执掌该行。

东南

* 据泰国《Post Today》报道,泰国财政政策办公室表示,11月出口部门和公共投资的改善显示该国经济复苏状况良好。该办公室预计,泰国经济2016年将增长3.3%。

* 据《Post Today》报道,Thanachart Bank PCL 预计,其2016年的信贷增速将下降2%,该行此前预计,其信贷增速将下降5%。 2016年前9个月,该行的不良贷款率为1.86%,并力图维持在2%以下。

* 据《印尼商报》报道,截至10月份,PT Asuransi Sinar Mas 已实现其2016年5万亿印尼盾保费收入目标的94%。

* 据《路透社》引述该保险公司的法定经营者 Didi Achdijat 的消息报道,商人 Erick Thohir 领导的财团将向保险公司 AJB Bumiputera 1912 的分公司投资2万亿印尼卢比。

* 据《路透社》报道,印度国家证券交易所表示,独立调查机构发现,在该交易所提交 IPO 申请之后,可能存在某些经纪商不公平地获准访问其服务器的情况。

* 据《Business Standard》报道,印度储备银行将贷款还款的窗口期从60天延长至90天, 适用于到期日在11月1日至12月31日期间的贷款。

* 据《路透社》引述一项声明报道,印度政府任命纽约大学经济学教授 Viral Acharya 担任印度储备银行的副行长之一,任期三年。

* 据《印度报业托拉斯》引述 State Bank of India 区域经理 Sakya Sinha Bairagi 的消息报道,该行否认媒体就有关废钞后,130亿卢比存入其在阿鲁纳查尔邦的支行的报道。

澳大利亚和新西

* Peter Hall 突然辞去 Hunter Hall International Ltd. 首席信息官一职之后,资产管理公司 Hunter Hall Global Value Ltd. 请求暂停在澳大利亚证交所交易其证券。

* 据《澳洲人报》报道,据说 法律事务所 Slater & Gordon 已与 National Australia Bank Ltd. 和 Westpac Banking Corp. 领导下的一家银行财团签署了一笔新的贷款协议。这两家银行持有 Slater & Gordon 大部分债务。

Sally Wang, Jonathan Cheah, Jaekwon Lim 和 Santibhap Ussavasodhi对此文亦有贡献。

《每日必读》的截稿时间为香港时间早上6点30分。一些外部链接可能需要额外订阅。


Credit Analysis
Flying Into The Danger Zone; Norwegian Air Shuttle

Highlights

This analysis was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. This is not investment advice or a stock suggestion.

Feb. 13 2019 — The headwinds are picking up for Norwegian Air Shuttle ASA (“Norwegian”), the eighth largest airline in Europe. The carrier has been battling with rising fuels costs, increased competition from legacy carriers, and persistent aircraft operational issues. Norwegian’s problems are a continuation of what have been turbulent months for budget airlines in Europe resulting in a collapse of Primera Air, based in Denmark, near-default of WOW air, Iceland’s budget carrier, and most recently bankruptcy of Germania.

When we pull back the curtain and review the creditworthiness of European airlines to explore further some of the causes for Norwegian’s turbulent period, we see Norwegian’s business strategy and financial structure have made the carrier highly exposed. Coupled with the traditionally slow winter season, the airline may have to navigate through the storm clouds forming on the horizon.

A View From Above

S&P Global Market Intelligence has developed CreditModelTM Corporates 2.6 (CM2.6), a statistical model trained on credit ratings from our sister division, S&P Global Ratings. The model combines multiple financial ratios to generate a quantitative credit score and offers an automated solution to efficiently assess the credit risk of both public and private companies globally.1 Within CreditModel, the airline industry is treated as a separate global sub-model to better encompass the unique characteristics of this industry.

Figure 1 shows the overview of S&P Global Market Intelligence credit scores obtained using CreditModel for European airlines. Norwegian’s weak position translate into the weakest credit score among its competitors. The implied ‘ccc+’ credit score suggests that Norwegian is vulnerable to adverse business, financial, or economic conditions, and its financial commitments appear to be unsustainable in the long term. In addition to Norwegian, Flybe and Croatian Airlines rank among the riskiest carriers in Europe and share a similar credit risk assessment. The airlines with the best credit scores are also Europe’s biggest airlines (Lufthansa, Ryanair, International Airlines Group (IAG), and easyJet). The exception among the top five European airlines is Air France-KLM, which is crippled by labour disputes and its inability to reshape operations and improve performance.

Figure 1: Credit Risk Radar of European Airspace
Overview of credit scores for European airlines

Source: S&P Global Market Intelligence. For illustrative purposes only.
Note: IAG operates under the British Airways, Iberia, Vueling, LEVEL, IAG Cargo, Avios, and Aer Lingus brands. (January 3, 2019)

S&P Global Market Intelligence’s sister division, S&P Global Ratings, issued an industry outlook for airlines in 2019 noting that the industry is poised for stability.2 It stated the global air traffic remains strong and is growing above its average rate at more than 6% annually. The report also cited rising interest rates dampening market liquidity while increasing the cost of debt refinancing and aircraft leases. Oil prices are expected to settle, and any further gradual increases in oil prices are expected to be compensated by rising airfares and fees. The most significant risks for airlines are geopolitical. Potential downside scenarios include a crisis in the Middle East or other disruptions in oil, causing oil prices to spike. The possibility of trade wars and uncertainty surrounding the Brexit withdrawal agreement represent additional sources of potential disruption or weakening in travel demand.

Flying into the danger zone

Although Norwegian has so far dismissed any notion of financial distress as speculation, it has simultaneously implemented a series of changes to prevent further turbulence.3 The airline announced a $230mm cost-saving program that included discontinuing selected routes, refinancing new aircraft deliveries, divesting a portion of the existing fleet, and offering promotional fares to passengers to shore up liquidity.

In Figure 2, we rank Norwegian’s financial ratios within the global airline industry and benchmark them against a selected set of competitor European budget carriers (Ryanair, easyJet, and Wizz Air). Through this chart, we can conclude that Norwegian’s underlying problems are persistent and the company’s financial results are weak. Norwegian’s business model of rapid growth and a debt-heavy capital structure have resulted in severe stress for its financials. Norwegian ranks among the bottom 10% of the worst airlines in the industry on debt coverage ratios, margins, and profitability. This is in sharp contrast to other European budget carriers, which are often ranked among the best in the industry. On the flip side, Norwegian’s high level of owned assets represents its strong suit and gives the carrier some flexibility to adjust its operations and improve performance in the future.

Figure 2: Flying at Low Altitude
Norwegian’s financial ratios are among the worst in the industry

Source: S&P Global Market Intelligence. For illustrative purposes only. (January 3, 2019)
Note: Presented financial ratios are used in CreditModelTM Corporates 2.6 (Airlines) to generate quantitative credit score in Figure 1.

Faster, Higher, Farther

Norwegian has undergone a rapid expansion in recent years, introducing new routes and flying over longer distances. Between 2008 and 2018, the carrier quadrupled its fleet from 40 to 164 planes.4 This enabled it to fly more passengers and become the third largest budget airline in Europe, behind Ryanair and easyJet. However, unlike its low-cost rivals, Norwegian ventured into budget long-haul flights. After establishing its new base at London Gatwick, it started operating services to the U.S., South-East Asia, and South America.

As a result of this expansion, Norwegian’s capacity as measured by available seat kilometres (ASK) and traffic as measured by revenue passenger kilometres (RPK) grew nine-fold between 2008 and 2018, as depicted in Figure 3. By offering deeply discounted fares, the carrier was able to attract more passengers and significantly grow its revenues, which were expected to reach $5bn in 2018. However, to be able to support this rapid growth, Norwegian accumulated a significant amount of debt and highly increased its financial leverage. This rising debt is putting Norwegian under pressure to secure enough liquidity to repay maturing debt obligations.

Figure 3: Shooting for the Stars
Norwegian’s rapid growth propelled by debt

Source: S&P Global Market Intelligence. All figures are converted into U.S. dollars using historic exchange rates. Figures for 2018 are estimated based on annualized YTD 2018 figures. For illustrative purposes only. (January 3, 2019)

Norwegian’s strategy to outpace growing debt obligations by driving revenue growth is coming under pressure. The data tells us that expansion to the long-haul market and the undercutting of competitors to gain market share proved to be costly and negatively impacted Norwegian’s bottom line. Operational performance, measured as unit revenue (passenger revenue per ASK) and yield (passenger revenue per RPK), have been slipping continuously since 2008, as depicted in Figure 4. Negative free operating cash flow required Norwegian to continuously find new sources of capital to finance its operations, and profitability suffered. The carrier was able to ride a tailwind of low oil prices and cheap financing for a while, however, the winds seem to be turning.

Figure 4: Gravitational Pull
Slipping operational and financial performance

Source: S&P Global Market Intelligence, Norwegian Air Shuttle ASA: “Annual Report 2017”, Norwegian Air Shuttle ASA: “Interim report - Third quarter 2018”. Figures for 2018 are estimated based on annualized YTD 2018 figures. For illustrative purposes only. (January 3, 2019)

Norwegian’s plan to outrun a looming mountain of debt obligations is resulting in a turbulent flight. While growing its top line, the carrier has been unable to convert increased capacity and traffic into consistent profit. With a stable industry outlook and cost-cutting measures in place, Norwegian lives to fly another day. However, any additional operational issues or adverse macroeconomic developments could send Norwegian deep into the danger zone.

Learn more about S&P Global Market Intelligence’s Credit Analytics models.
Learn more about S&P Global Market Intelligence’s RatingsDirect®.

S&P Global Market Intelligence leverages leading experience in developing credit risk models to achieve a high level of accuracy and robust out-of-sample model performance. The integration of Credit Analytics’ models into the S&P Capital IQ platform enables users to access a global pre-scored database with more than 45,000 public companies and almost 700,000 private companies, obtain credit scores for single or multiple companies, and perform scenario analysis.

S&P Global Market Intelligence’s RatingsDirect® product is the official desktop source for S&P Global Ratings’ credit ratings and research. S&P Global Ratings’ research cited in this blog is available on RatingsDirect®.

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings.
2 S&P Global Ratings: “Industry Top Trends 2019: Transportation”, November 14, 2018. https://www.capitaliq.com/CIQDotNet/CreditResearch/viewPDF.aspx?pdfId=36541&from=Research.
3 Norwegian Air Shuttle ASA, “Update from Norwegian Air Shuttle ASA”, press release, December 24, 2018 (accessed January 3, 2019), https://media.uk.norwegian.com/pressreleases/update-from-norwegian-air-shuttle-asa-2817995.
4 Norwegian Air Shuttle ASA: “Investor Presentation Norwegian Air Shuttle”, September 2018.

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Listen: Street Talk Episode 39 - A New Era For Blockbuster Bank M&A

Feb. 08 2019 — The days of large bank buyers pursuing deals to plant a flag in a new market might be gone with acquirers now seeing deals as a way to support investments in technology. BB&T touted that prospect when discussing its landmark merger of equals with SunTrust. In the episode, we spoke with S&P Global Market Intelligence colleagues Zach Fox and Joe Mantone about the drivers of BB&T/SunTrust merger, how much i-banks advising on the deal stand to earn and the prospect of other similarly sized transactions emerging in the future.

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No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).


Technology, Media & Telecom
Advertising Market Growth Unable To Keep Up With Strong GDP

Feb. 07 2019 — Cable and broadcast are losing their dominance in the viewing world. As more eyeballs migrate to online and mobile viewing, major media companies are struggling to adopt a common measurement system. Their goal is to track and consolidate the leaked viewers who have been switching first from analog, with a full ad load, to DVR, which lets them skip ads, and now to digital with limited or no advertising.

Click here for advertising market projections in Excel format.

The business models of the online services differ, with the majority of viewers still watching ads, albeit in much smaller pods. Others have voted with their wallets, paying a premium to view content on Hulu and other platforms without any advertising at all. Hulu with ads is only $5.99, while the subscription without ads is twice the price at $11.99. Clearly, viewers are willing to pay a premium for the privilege of not having to watch ads.

Although the broadcast networks have been somewhat flat for some time, the cable network industry has only recently had to cope with the reality that its heyday is over. After decades of showing strong single- or double-digit growth, cable networks have seen growth slow over the past five years to a range of just 3% to negative 1%.

A number of issues have been impacting cable networks, most notably cord cutting and cord shaving, with companies that are big in the children's market suffering disproportionately. Viacom Inc. was the first to show significant weakness: Gross ad revenue at its behemoth Nickelodeon peaked at nearly $1.3 billion in 2010 and 2011, then dropped to $1.10 billion in 2012. Nickelodeon's average 24-hour rating slipped from 1.44 in 2011 to 1.13 in 2012.

The company recovered slightly to a 1.2 rating in 2013 but has struggled significantly since then, with its overall rating at just 0.74 in 2017.

Parent company Viacom posted zero to negative ad revenue growth from the second quarter of 2014 all the way through the third quarter of 2018, an unprecedented negative run.

By contrast, the other cable network owners posted mixed results, but none have been as consistently negative as Viacom. The timing of big sporting events, especially the Olympics, contributes to much of the volatility at the various networks.

Broadcast and cable combined, including both local and national spots, increased ad revenue market share from 24% in 1988 to 32% in 2018. This was a strong showing given that cable alone rose from a less than 2% share in 1988 to almost 15% in 2018.

Overall, the ad market has continued to grow, mostly due to the popularity of digital spots. However, growth in the U.S. advertising market has been unable to maintain its historical trend of growing in lockstep with the gross domestic product, equating to approximately 2% of GDP.

Its share of GDP was generally in that range until the Great Recession, which pushed that metric from 1.8% in 2007 to 1.6% in 2008 and to 1.4% in 2009. In 2017, we estimate this fell as low as 1.2% with no sign that it can recover to the 2.0% range.

Although the growth of digital has been positive for the ad industry, there have been many less encouraging stories, particularly related to print, which shrank from 67.4% of the market in 1988 to just 41.1% in 2018.

Even after this dramatic shift over several decades left print with a much smaller base, all forms of print continue to struggle. Although the numbers below for the print sector do not include their digital operations, few companies have been able to offset the decline in traditional media with online initiatives.

Much of their revenue has been devoured by the usual internet giants such as Alphabet Inc.'s Google LLC and Facebook Inc. Even companies with disruptive business models targeting the younger generation, such as VICE Media LLC, have struggled.

We do not expect this to change much in our five-year outlook, although digital is certainly entering a mature phase. In 2023, we expect satellite radio to be growing the fastest, albeit from a much smaller base, and digital — although still in the No. 2 spot — is expected to grow at only 4.1% per year, down significantly from the 10.9% growth rate we expect for 2019.

Print is expected to continue to struggle, with Yellow Pages hit the hardest, declining at more than 16% per year. We do not expect most of these paper directories to survive over the long term, with the exception of those with very narrow niche audiences, such as small directories delivered to hotels in resort towns.

Digital has had remarkable progress, with a CAGR of 16.8% from $22.65 billion in 2009 to $91.89 billion in 2018. In sharp contrast, direct mail, the largest ad category in 2009, shrank from $44.50 billion in 2009 to $37.50 billion in 2018. The CAGR of decline has been modest at negative 1.9%.

Direct mail is now in third place with market share of 14.7% in 2018 versus 22.3% in 2009, behind digital at 35.9% and cable TV at 14.8%. The biggest slides occurred in Yellow Pages, which have fallen at a CAGR of negative 19.7% from a 5.5% share in 2009 to less than 1% in 2018; and daily newspapers, which contracted at a negative 11.8% CAGR from 12.4% in 2009 to 4.0% in 2018.

For a lengthy analysis which also includes an analysis of performance of the local ad market versus national, refer to the Economics of Advertising, or Click here.

Economics of Advertising is a regular feature from Kagan, a group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Listen: Street Talk Episode 38 - PG&E Bankruptcy Reveals Climate Change Risk Facing Calif. Utilities

Feb. 06 2019 — The PG&E Corp. bankruptcy shows that financial backers of California utilities need to consider the risks associated with climate change but that exposure might be unique to entities operating in the state. In the episode, Regulatory Research Associates analysts Dan Lowrey and Dennis Sperduto discuss the next steps in PG&E's bankruptcy process, the future of its power purchase agreements and the risks that climate change can bring to backing utilities.

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No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).